This is a good example of significant cost synergies being squeezed from a major takeover. Google, which acquired Motorola Mobility (a manufacturer of mobile phones) for $12.5bn, has decided to make 20% of Motorola’s workforce redundant. That’s around 4,000 employees who will lose their jobs.
The strategic rationale for the rationalisation of the Motorola business appears to be driven by two decisions:
To withdraw Motorola from manufacturing “low-end mobile phones” (i.e. not smartphones)
To pull Motorola out of geographic markets where it is making losses
The rationalisation strategy at Motorola looks like it might only be at the beginning of a process. A broader turnaround and repositioning of the acquisition is in play - so we can probably expect further announcements.
According to the Telegraph:
“The drastic cuts are the first step in a turnaround of Motorola that will be closely watched by Google’s investors, many of whom were sceptical about the price tag on Motorola.
Google wanted to get its hands on the phone company’s 17,000 patents and 7,500 pending patents, which would provide it with a bigger slice of the tech world’s intellectual property and give it more legal weight when going into battle against competitors such as Apple.”
Google’s takeover of Motorola Mobility raised many doubts amongst investment analysts, who questioned both the high price being paid and also the strategic rationale of vertical integration (Google - a software business - buying Motorola, a phone maker).
Google’s first quarterly report with Motorola Mobility included in results showed that Motorola Mobility contributed $1.25bn in revenue for Q2 in 2012, but had losses of $233m. It is vital for Google that it stems those losses to prevent the Motorola takeover destroying shareholder value.
Join Graham Prior and Jim Riley for a resource-packed CPD day which will help you accelerate your planning and lesson preparation for the new AQA A Level Business. We've packed this day with resources to help teach the new spec content. We also consider how best to approach the challenges of a linear Business course.
Fully worked A Grade answers to recent Edexcel GCSE Business Studies Unit 3 exam papers with detailed examiner commentary on how good technique scores top marks
This resource comprises a complete collection of editable worksheets that that enable students to practice all elements of the quantitative and data analysis skills required by the Year 1 (AS) teaching content.